UAE – New reinsurance regulations
Tuesday, 12 05 2017, Category: Insurance and Reinsurance, Country: U.A.E
The introduction of a new robust reinsurance framework in the UAE would be a major step towards growing the local market, but it may not convince international reinsurers to move away from the current practice of spreading risk through other international markets.
The UAE’s Federal Insurance Authority (IA) has proposed a new reinsurance regime. It has published draft regulations. Following on from its game-changing life insurance regime, the IA shows no sign of slowing down in its quest to spread its regulatory framework into all corners of the UAE’s insurance market.
Whilst still not 100% clear, the regulations do not seem to be altering the position that local insurers are free to cede their risks to non-admitted reinsurers; nor does it impose a minimum retention on local insurers that some feared.
Reinsurance licensing categories for new companies, branches of foreign (re)insurers and IA-licensed insurers are formulated; a big shift from the IA’s traditional position of treating the insurance and reinsurance markets as largely interchangeable in terms of regulatory oversight.
Local insures can only cede their risks to reinsurers that meet minimum classifications as issued by accredited bodies (S&P, Moody’s etc).
Local insurers are required to put in place comprehensive, three-year plans detailing their retention and reinsurance projections across each product line and report to the IA on the same.
Furthermore, applicants for the reinsurance company licence need to provide comprehensive information as part of their application including a five-year feasibility study, details as to their retrocession coverage as well as general fit and proper eligibility of founders/key management. Companies are required to be UAE public companies with 51% UAE/GCC ownership and paid-up capital of AED 250m ($68m).